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UCLA economists say US economy improving, CA should outpace US

UCLA Anderson Forecast senior economist David Shulman. Shulman and other UCLA economists said the U.S. economy is expected to ramp up this year and that California's economy will outpace the U.S. Brian Watt/KPCC

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The U.S. economy is “slowly beginning to ramp up” this year for some positive growth in 2014 and the year after, according to the latest UCLA Anderson Forecast.

Economic growth slowed a bit at the end of 2012, but the UCLA Anderson School of Management economists say Gross Domestic Product will grow 1.9 percent this year, then jump 2.8 percent next year, and 3.1 percent in 2015.

The housing market led the economic downturn, but the UCLA Anderson Forecast said it's now leading the upturn. The economists expect construction to start on more than one-million homes nationwide this year, up from 781,000 in 2012. Sales of cars and trucks will also fuel economic growth, as households that have recouped their losses from the Great Recession begin to replace their old vehicles.

But the forecast also said the U.S. economy faces some headwinds this year. The sequester cuts in federal spending will have some impact, but the economists expect Congress and the Obama Administration to reach a deal to end those cuts by April or May.

Businesses will also be adjusting to the Affordable Care Act, and "firms have incentives to convert full-time work to part-time work and for small firms to limit their headcount to 50 full time employees," writes the forecast's Senior Economist David Shulman. But the economy will push through those headwinds, and the unemployment rate will continue to fall, from 7.9 percent now, to 7.1 percent by the end of 2014, and to around 6.5 percent by the end of 2015, Shulman and his colleagues predict.

“As the world economy expands, there’s going to be more demand for equipment and software," said Nickelsburg. "So there will be more demand for the kinds of goods and services that California disproportionately produces."

Nickelsburg expects California’s unemployment rate to average about 9.5 percent this year, but fall to just below 8.5 percent next year and keep falling in 2015.